Impact of Paris attacks hits luxury profits
Burberry has announced a drop in sales in its second half trading update. Total revenue dropped 1% to £1,410 and comparable sales were down 2%.
Sales in China, Korea and Japan continued to grow but sales to visiting tourists in Europe dropped. However, Burberry said that this was partly offset by an increase in domestic customers in Europe, largely thought to be caused by recent terrorist attacks in Paris and Brussels. Retail in the UK and the Middle East was said to be “difficult”.
Licensing revenue dropped to £16m as the brand’s Japanese license expired as Burberry looks to take control of its business in the region. The company’s 35-year deal with Sanyo Shokai ended last year.
Christopher Bailey, Chief Creative and Executive Officer at Burberry, said that the current economic situation was “challenging” for luxury brands. However, he maintained that brand momentum was “strong” thanks to innovation in new products and digital.
Bailey said: “In an external environment that remains challenging for luxury, we continue to focus on reducing discretionary costs and are making good progress with developing enhanced future productivity and efficiency plans.”
Beauty wholesale grew 11% to £121m, with sales of the new Mr Burberry fragrance driving growth. Product extensions around the fragrance also performed well. This outperformed overall wholesale revenue, which decreased by 6% in the quarter.
Digital sales grew across all regions, with mobile purchases accounting for most growth, while the brand also opened five new mainland stores.
Looking ahead, Burberry suggested that profits for the 2017 financial year would be towards the bottom range of analysts expectations.